Family Trip

3 Hurdles that Trip Up Younger Generations in a Family Business

For many family-owned companies, one of the greatest obstacles to long-term business continuity is if, and how, ownership and leadership can be transitioned to its next generation.

Privately held or controlled family businesses have unique opportunities — and challenges — to ensure long-term success. Family businesses often adopt the best practices that public companies use for talent management, strategic growth, and organizational adaptability. However, if a family wants to retain control of their enterprise for years to come, they must also be able to navigate some challenges that public companies don’t face, including managing family dynamics and conflict; cultivating talent and leadership within the family; and supporting rising generation family members to find their own path to thrive and contribute (either within the family business, or elsewhere). This latter challenge is far less discussed and is often emotionally and psychologically tangled. Yet, it is fundamental to cultivating a resilient family enterprise — both for the family and for the long-term health of the business.

Tripwires, Negative Self-Narratives, and the Path to Thriving

Most rising generation family members agree that growing up around a family business has many advantages. Less visible are the hidden tripwires of this often-complex family situation.

An understanding of these common tripwires and the skills needed to avoid or overcome them can help individual family members thrive, and ultimately support the long-term viability of the family enterprise. New research from the field of positive psychology, with its focus on human strengths, has shown that we can provide a more ideal scaffolding for the rising generation to navigate their path.

Tripwire #1: A lack of identity that’s separate from the family, the family’s wealth, or the family business.

Individual identity is a foundational organizing principal of personal development that evolves throughout one’s lifetime. While it’s a lifelong process, one’s teens and 20s are a particularly important time to test ideas, explore interests, and learn to work toward meaningful goals.

Growing up in the gravitational field of a significant family enterprise can muddle this process. Young adults who work for their family may lack both a clear sense of their individual attributes and legitimate situations in which they can test their abilities. Their family counterparts who choose a path outside the family enterprise may feel the weight of their family’s name and reputation, therefore limiting their personal exploration. In both cases, these individuals can experience stunted confidence in their own skills, causing them to question the validity of feedback and wonder whether positions or accolades are earned, or simply the result of their family’s influence.

Antidote #1: Actively build identity capital.

Identity capital is the individual collection of resources and experiences we gather over time, which impacts how we engage in the world. It is the result of the investments — education, work, hobbies, travel — we make in ourselves. Rising generation members who have a deep well of identity capital will be more confident in their interests and abilities, and better prepared to commit to family enterprise work or pursue another profession.

Effective ways to build identity capital are: going to college in a place where your last name may not be known and you can explore interests and talents more freely; engaging in developmental assessments of skills and abilities (such as the VIA Character Strengths Assessment; the Pro-D Assessment, which identifies one’s top motivations, abilities, and personality styles; or Gallup’s well-known CliftonStrengths) that hold up a bias-free mirror; or working outside your family’s business before considering joining it.

One rising gen member told me in a recent research interview that their family reputation may have played a role in their acceptance at prep school, college, or grad school. Passing the bar exam, on the other hand, was an important identity-capital building experience: “That was all me.”

Tripwire #2: Immense pressure to succeed and measure up — with a corresponding fear of failure.

Being raised in a family with a prosperous enterprise, the bar for success that’s modeled is exceedingly high (and, often, the definition of success is narrow). Whether that bar has been set by a grandparent, parents, or any high-achieving relatives, the legacy of business success — and the fear of not measuring up — can be a heavy burden for a rising gen member to carry.

As one fourth-generation family member told me: “In our family, average isn’t anywhere good enough. Every generation has done something more impressive than the last. What if I’m just average? Or even just above-average? … That legacy is a pretty massive weight.”

Antidote #2: Develop a growth mindset and grit.

Growth mindset and grit are important character traits that go hand in hand. They’re both powerful, research-validated antidotes to the overwhelming fear of failure. People who have a growth mindset believe that human traits (like intelligence, resilience, and grit) are malleable and can be developed through hard work, good strategies, and thoughtful feedback. Fundamentally, growth-minded people view difficulty and failure as part of the path of learning, and not signs of their weakness.

Grit is defined as “passion and perseverance in pursuit of a long-term goal, despite inevitable setbacks along the way.” Growth-minded people tend to exhibit grit as they learn new skills, and gritty people are able to stay motivated in pursuing long-term goals by adopting a growth mindset.

Keys to cultivating grit and a growth mindset include: asking for feedback; a willingness to struggle while you learn the ropes and stretch into a new role; recognizing that genuine constructive feedback is a sign that someone believes in you (not a sign you’re not good enough); and the fortitude to stick with a new challenge long enough to build a genuine sense of skill and accomplishment.

Tripwire #3: Diminished motivation due to access to unearned wealth driven by the preceding generation’s successful business ownership.

Successful business creators do what few people can — turn ideas into gold. This translation of human capital into material success is both impressive and crushing, as it can absorb the attention, aspirations, and energies of non-wealth creating family members.

The long shadow cast by a wealth creator can, unintentionally, result in a form of “learned helplessness” for the family’s rising generation — a state in which one realizes that their own efforts do not significantly alter their circumstances, so they stop trying to assert change. Common tasks are often done for them. The lack of a financial need to work can cast doubt on the human need to work. Motivation falters.

Antidote #3: Learned mastery.

Learned mastery is the process of engaging in experiences that help prove that you have what it takes to excel in a specific skill or domain (think: athletics, art, music, computer coding). Inherent to the process of mastery is a level of “desirable difficulty” — recognizing difficulty in goals that are still worth pursuing. Intentionally cultivating mastery experiences and developing your ability to tolerate (and even embrace) difficulty can buffer you against the downward cycle of helplessness that can sap motivation. This, along with grit and a growth mindset, can build your confidence and drive.

The Path to Resilience

Being a resilient family business intrinsically means that some key stakeholders are also family members — so success relies not only on managing strategy, people, products, operations, and balance sheets, but also upon the deeply charged interpersonal and psychological space of being family. Having a capable, confident, and self-determining rising generation to whom responsibility and, eventually, batons can be passed will help ensure the durability and prosperity of your family enterprise.